Caught in a bursting bubble

Once dominant county industry brought to knees when construction slowed

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(Jenny Kane – jkane@shawmedia.com)

Steven Anderson is a third-generation electrician who owns his own company, Lantern Electric Co. Since 2007, he has had to cut back his staff and lost hundreds of thousands in contracts for subdivisions that fell through when the housing bubble burst.

When the housing bubble burst in 2007, the construction industry was sucker-punched.

Of industries hit hardest during the recession that followed, the construction sector experienced the largest national decrease in employment, according to the U.S. Bureau of Labor Statistics.

By December 2008, gross job gains were the lowest on record, and it was estimated that almost 1 million jobs had vanished.

In McHenry County, where plumbing and electrical work, site preparation, and other construction-related trades had been reliable and lucrative occupations for nearly a decade, the housing collapse decimated the local workforce.

The effects are reflected in the county’s unemployment figures – 3.8 percent in October 2007, 5.8 percent in October 2008, and 9.6 percent in July 2009.

They also are reflected in these figures:

• 6.5 percent: The county’s residential vacancy rate, according to data compiled by the McHenry County Economic Development Corp. and the U.S. Census Bureau. In 2000, the rate was 3.8 percent.

• About 300 students: The amount enrollment will drop in Cary School District 26 by 2013 due to the decline in new housing and a halt in housing turnover bringing new children into the district.

• 28 percent: The percentage by which traffic accidents dropped in McHenry County between 2009 and the five years leading up to it. The Illinois Department of Transportation says the change is due in large part to the economy. Fewer people are driving to work, and people have less money for discretionary spending.

Today, four years after the collapse of the housing industry nationally and locally, the effect is arguably most reflected in the offices and homes of those who work, or once worked, in the construction trades.

Take a seat at The Little Chef on Riverside Drive in McHenry on an early weekday morning and you might meet Brad Krueger of Johnsburg. He is one of hundreds whose lives have been upended by the housing bust.

A father of two boys – one in high school, one in college – Krueger has worked as a concrete construction operator engineer for 23 years. He used to come in to The Little Chef before work, order a big breakfast, and shoot the breeze on his way to a job. There were lots of others like him, said Terry Fair, who owns The Little Chef.

The workers still come in, but now it’s to buy a cup of joe. Nobody can afford the big breakfasts anymore, she said.

“It’s just a nice place to go,” Krueger explained. “Workers go there and we can all share stories, commiserate.”

Once busy pouring foundations for subdivisions in towns such as Spring Grove, where the pre-recession average was 74 new single-family homes a year, Krueger now is on his union’s unemployed list and has been for about three years.

“I felt guilty when I first started on the list, like gosh, I’m not working. What is wrong with me?” Krueger said. “After a while, I realized this isn’t my fault.”

For Krueger, the change has meant tightening the family budget and even changing his hobbies.

“I’m doing a lot of hunting and fishing now,” he said. “I got into gardening, too. When you get a lot of extra time on your hands and don’t have any extra money, these are things that bring something back to your table.”

Another thing he especially likes about gardening – it’s a job that uses his hands.

“That’s where I belong,” he said.

Steven Anderson, owner of Lantern Electric Co. in Lakemoor, also was hit hard when McHenry County’s new home and business building dried up.

Anderson started Lantern Electric 14 years ago – “mid-housing boom,” he said. He spoke on a sunny September morning from behind a tidy desk in his office on Wegner Road. He’s had time to keep the desk tidy these days.

“When we started, residential was 50, maybe 60 percent of business,” he said. “We were doing some major tract homes, town homes and custom homes, too. The other half was mostly new commercial and industrial.”

According to local municipal records, by the second year Anderson was in business, he was working in a McHenry County that saw more than 500 new single-family homes go up in Algonquin, Johnsburg, McHenry and Woodstock alone. Residents had money to build, add on, and burn.

Today, it’s different.

For example, housing permits from Crystal Lake, Fox River Grove, Lakewood, Oakwood Hills, Prairie Grove and Cary dropped from 599 in 2005 to just 35 in 2009, according to a 2011 Kasarda Enrollment Study used by local school districts.

Anderson and others like him have had to adapt.

He used to employ five to six electricians besides himself. He now employs two to three, depending on the month.

He has changed the nature of his business, too. The residential portion has dropped to 15 percent. Most of his work now is remodels, industrial and government-contracted jobs.

“We’re still paying the bills,” Anderson said. “But for the bigger jobs, we have to drive farther.” Work now takes him to places like Winnetka, Schiller Park and Bensenville, he said.

Anderson remembers one of the last big projects to go south, signaling the end of boom times in McHenry County. It was a contract for Lakemoor Townhomes near Lily Lake Road. He was hired to do all of the electrical work for seven, five-unit buildings. The contract was bid in 2007 and worth “a couple hundred thousand dollars.”

“Ten were built. Ten out of 35 units,” Anderson said ruefully. The developer couldn’t sell the rest. Today, the lot is mostly empty and Lantern Electric is out the cash.

It is not just that times are tough for construction because people don’t have money to build, Anderson explained. It is also because foreclosed homes have flooded the market.

“You can buy a home for half of what it would take to build new,” Anderson said.

If there is a silver lining in the strife, the extra time in the office and looking for work these days has pushed Anderson to continually think outside the box for how he can grow his business.

In February, Lantern Electric Company got a website that is helping to drive in business.

Anderson hopes that perhaps, if there is another housing boom, the web presence will help him catch the wave in stride.

Although not a turnaround, August news from the U.S. Bureau of Labor Statistics could signal a start in the right direction.

The Chicago area’s 6.1 percent rate of job growth in the construction industry was faster than the .03 percent gain nationwide, and the industry enjoyed the largest-year-over-year growth out of any category for the reporting period.